United States Government Accountability Office
Washington, DC 20548
January 22, 2008
Congressional Committees
Subject: Defense Logistics: The Army Needs to Implement an Effective Management
and Oversight Plan for the Equipment Maintenance Contract in Kuwait
The Department of Defense (DOD) relies on contractors to perform many of the
functions needed to support troops in deployed locations. For example, at Camp
Arifjan, Kuwait the Army uses contractors to provide logistics support for operations
in Iraq and Afghanistan. Contractors at Camp Arifjan refurbish and repair a variety of
military vehicles such as the Bradley Fighting Vehicle, armored personnel carriers,
and the High-Mobility, Multi-Purpose Wheeled Vehicle (HMMWV). However, while
contractors provide valuable support to deployed forces, we have frequently reported
that long-standing DOD contract management and oversight problems increase the
opportunity for waste and make it more difficult for DOD to ensure that contractors
are meeting contract requirements efficiently, effectively, and at a reasonable price.
In its fiscal year 2007 report,1 the House Appropriations Committee directed GAO to
examine the link between the growth in DOD’s operation and maintenance costs and
DOD’s increased reliance on service contracts. In May 2007 we issued a report that
examined the trends in operation and maintenance costs at installations within the
United States.2 A second report examining the cost impact of using contracts to
support deployed forces is expected to be issued in 2008. In the interim, we are
issuing this report to you on the Army’s Global Maintenance and Supply Services
(GMASS) contract’s multimillion-dollar Kuwait task order—Task Order 1—because
of the findings we uncovered during this engagement and the implications for waste
of taxpayer dollars and the potential negative impact on the warfighter as well as on
our redeployment from Iraq once a decision is made to do so.
This report discusses information about Task Order 1 that we developed during our
review. Our objectives were to (1) evaluate the contractor’s performance of
maintenance and supply services under Task Order 1, (2) determine the extent to
which the Army’s quality assurance and contract management activities implement
key principles of quality assurance and contract management regulations and
1
H.R. Rep. No. 109-504, at 46-47 (2006).
GAO, Defense Budget: Trends in Operations and Maintenance Costs and Support Services
Contracting, GAO-07-631 (Washington, D.C.: May 18, 2007).
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guidance, and (3) determine the extent to which the Army is adequately staffed to
perform oversight activities.
To evaluate the contractor’s performance under Task Order 1, we interviewed
contractor officials at Camp Arifjan, Kuwait as well as Army officials at the Army
Sustainment Command in Rock Island, Illinois and at the 401st Army Field Support
Battalion in Camp Arifjan, Kuwait. We also reviewed various Army and contractor
documents related to contractor execution, analyzed Army provided data to compute
pass/fail percentages, and observed the contractor’s maintenance processes. To
determine the extent to which the Army’s quality assurance and contract
management activities implement key principles of quality assurance and contract
management regulations, we met with contracting and quality assurance officials at
Camp Arifjan, Kuwait, and Rock Island, Illinois, and reviewed various oversight and
surveillance documents. We also observed physical inspections of equipment
presented to the Army and analyzed Army-provided data on oversight and
surveillance. To determine if the battalion was adequately staffed to perform
oversight activities, we reviewed battalion staffing documents, spoke with battalion
oversight and command officials, and reviewed DOD and Army guidance and
regulations regarding contract oversight and management. Although data used to
compute pass/fail percentages did not include all failures, we determined that the
data were sufficiently reliable for the purposes of our review. We conducted this
performance audit from March 2007 through October 2007 in accordance with
generally accepted government auditing standards. Those standards require that we
plan and perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit objectives. We
believe that the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. Enclosure I is a detailed discussion of our
scope and methodology.
Results in Brief
Since the inception of Task Order 1, the contractor has had difficulties meeting
maintenance standards, maintaining an accurate database, and meeting production
requirements. According to Task Order 1, the contractor shall ensure that equipment
is repaired to specified Army standards. However, in many cases, the equipment
presented to the Army as ready for acceptance failed government inspection. Army
corrective action reports attributed these performance shortcomings to problems
with the contractor’s quality control processes and other factors. First, our analysis
of Army data found that for five types of vehicles inspected by quality assurance
personnel from July 2006 through May 2007, 18 to 31 percent of the equipment
presented to the Army as ready for acceptance failed government inspection. In
addition, some equipment presented to the Army as ready for acceptance failed
government inspection multiple times, sometimes for the same deficiencies. Army
officials believed the contractor’s quality control system used to ensure that
equipment met specified Army standards was poor and the contractor depended on
the Army to identify equipment deficiencies. When the Army inspected equipment
that did not meet standards, it was returned to the contractor for continued repair.
Our analysis of Army data found that since May 2005 an additional 188,000 hours
were worked on equipment after the first failed government inspection, which
translates into an additional cost of approximately $4.2 million. Furthermore, the
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contractor was required to operate wash racks to clean equipment in preparation for
its transport back to the United States. However, according to DOD inspectors,
equipment that was presented for inspection frequently did not meet cleaning
standards referenced in Task Order 1. Second, although the contractor is required to
ensure the correct equipment condition code and location are entered into a
maintenance management database, on numerous occasions Army officials found
that incorrect status was assigned to equipment within the database. For example, on
one occasion, the contractor coded a HMMWV as “ready for issue”; however, when
the Army went to issue the vehicle it was in a maintenance shop being repaired by the
contractor. Among the reasons the contractor gave for problems with the database
included human error and a fault in the way the database handles certain data.
According to the contracting office, erroneous equipment status reporting affects the
battalion’s ability to make timely and accurate decisions regarding the availability of
equipment to support the warfighter. Third, according to the Army, the contractor has
not met some production requirements and deadlines for some tasks were extended.
For example, according to the Army, the contractor failed to meet the monthly
production requirement for a HMMWV refurbishment effort. According to a
contracting official, a lack of contractor standard operating procedures and a lack of
in-process quality checks led to a high number of equipment defects, thereby delaying
Army acceptance of the HMMWVs. In addition, the contractor was unable to
independently meet certain production deadlines set by the Army. For example, the
contractor was unable to meet a deadline for repairing equipment for the Iraq
security forces without government assistance. Poor contractor performance may
result in the warfighter not receiving equipment in a timely manner.
The quality assurance and contract management actions taken by the 401st Field
Support Battalion make it difficult for the battalion to meet several key principles
detailed in the Army Quality Program regulation and other DOD quality assurance
principles. These principles include, (1) using demonstrated past performance in riskbased planning, (2) identifying recurring contractor performance issues, and (3) using
past performance information as an evaluation factor for future contract awards. For
example, we found that the battalion does not always document deficiencies
identified during its quality assurance inspections. Instead, quality assurance
inspectors were allowing the contractor to fix some deficiencies without
documenting them in an attempt to prevent a delay in getting the equipment up to
standard to pass inspection. In addition, although the battalion’s July 2006 draft
maintenance management plan requires that contractor performance data be
analyzed to help identify the cause of recurring quality problems and evaluate the
contractor’s performance, the Army did not begin to review the contractor’s
performance data until July 2007. We found that although data on contractor
performance were readily available, the battalion was not routinely tracking or
monitoring the percentage of equipment submitted for government acceptance that
failed quality assurance inspection. Furthermore, we found that in May 2006, the
Army awarded the contractor a major HMMWV refurbishment effort, valued at
approximately $33 million, even though numerous incidents of poor contractor
performance had been documented. According to the contracting officer, the Army
believed the contractor was fully engaged in correcting poor performance issues.
Until the 401st Army Field Support Battalion implements the quality and management
procedures in its quality and management plans, it will be unable to determine the
extent to which the contractor is meeting the contract requirements and will be
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unable to identify problem areas in the contractor’s processes and initiate corrective
action to ensure that deployed forces are receiving equipment in a timely manner.
Our analysis indicates that the Army is inadequately staffed to conduct oversight of
Task Order 1. Authorized oversight personnel positions vacant at the time of our visit
in April 2007 included those of a quality assurance specialist, a property
administrator, and two quality assurance inspectors. The contracting officer told us
that the two civilian positions (the quality assurance specialist and the property
administrator) had been advertised but the command had not been able to fill the
positions with qualified candidates. The battalion was unsure why the two military
positions (the quality assurance inspectors) had not been filled. The lack of an
adequate contract oversight staff is not unique to this location. We have previously
reported on the inadequate number of contract oversight personnel throughout DOD,
including at deployed locations. Army officials also told us that in addition to the two
quality assurance inspectors needed to fill the vacant positions, additional quality
assurance inspectors were needed to fully meet the oversight mission. According to
battalion officials, vacant and reduced inspector and analyst positions mean that
surveillance is not being performed sufficiently in some areas and the Army is less
able to perform data analyses, identify trends in contractor performance, and
improve quality processes. Also, the Army is considering moving major elements of
option year 3 (including maintenance and supply services) to a cost plus award-fee
structure beginning January 1, 2008. Administration for cost plus award-fee contracts
involves substantially more effort over the life of a contract than for fixed-fee
contracts. Without adequate staff to monitor and accurately document contractor
performance, analyze data gathered, and provide input to the award-fee board, it will
be difficult for the Army to effectively administer a cost plus award-fee contract
beginning in January 2008.
Accordingly, we are making recommendations to the Secretary of Defense to direct
the Army to review and evaluate its procedures for managing and overseeing the
GMASS task order for services in Kuwait and take the necessary actions to improve
contract management and address the issues raised in this report. The Army should
take the steps necessary to effectively implement its management and oversight plan
to ensure quality maintenance work by the contractor and proper administration of
the cost plus award-fee contract.
In commenting on a draft of this report, DOD concurred with our recommendations
and discussed proposed implementation actions to be taken by the Army. DOD’s
comments are reprinted in enclosure II.
Background
In March 2004, Army Field Support Command (now the Army Sustainment
Command) issued a solicitation to provide maintenance and supply services in
support of Army Materiel Command, Army Field Support Command, coalition forces,
and other authorized government agencies. In October 2004, the Army awarded three
indefinite quantity/indefinite delivery-contracts3 for GMASS. The Army
3
There are three types of indefinite-delivery contracts: definite-quantity contracts, requirements
contracts, and indefinite-quantity contracts. The appropriate type of indefinite-delivery contract may
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simultaneously issued Task Order 14 for maintenance services at Camp Arifjan. Task
Order 1 contains several different types of contract line items, including cost plus
fixed fee and firm-fixed-price provisions.5 For those provisions that are cost plus
fixed fee, payment of a negotiated fee that is fixed at the inception of the task order is
made to the contractor.6 The fixed fee does not vary with the actual costs but may be
adjusted as a result of changes in the work to be performed. This permits contracting
for efforts that might otherwise present too great a risk to contractors, but provides
the contractor only a minimum incentive to control costs and, in turn, provides the
greatest risk to the government. In addition, the Army cannot adjust the amount of
fee paid to contractors based on the contractors’ performance for the cost plus fixed
fee provisions. For those provisions in the task order that are firm fixed price, the
contractor has full responsibility for the performance costs and resulting profit or
loss.
Task Order 1 was for 1 year and was originally valued at $20,354,256. However, by the
end of the base year Task Order 1 costs increased to approximately $102 million. The
Army has exercised three options under the contract and Task Order 1. Costs for
option years 1 and 2 were $209.6 million and $269.4 million, respectively. Cumulative
obligations for the base year plus option years 1 and 2 were approximately $581.5
million.7 There have been at least 86 modifications to the contract and Task Order 1,
including some that added requirements, such as Army prepositioned stock reset, a
tire assembly and repair program, and HMMWV refurbishment. Many of the
modifications were administrative, such as providing additional funding, extending
performance work periods, updating contract line item numbers, and fixing
typographical errors.
Administration and oversight of this contract is the responsibility of the contracting
officer located at the Army Sustainment Command in Rock Island, Illinois. According
to the Federal Acquisition Regulation, contracting officers are responsible for
ensuring performance of all necessary actions for effective contracting, ensuring
compliance with the terms of the contract, and safeguarding the interests of the
United States in its contractual relationships. For Task Order 1, the contracting
officer has delegated some administrative control of the contract and task order to
administrative contracting officers located in Kuwait. The primary administrative
contracting officer has contract administrative responsibilities for most of the tasks
included in Task Order 1 and serves as the lead person for the battalion’s contract
be used to acquire supplies, services, or both when the exact times, exact quantities, or both of future
deliveries are not known at the time of contract award. An indefinite-quantity contract provides for an
indefinite quantity, within stated limits, of supplies or services during a fixed period. FAR §§ 16.501-2,
16.504
4
Under the solicitation, the minimum guaranteed award to the primary awardee included, among other
things, maintenance and supply services performed at Camp Arifjan, Kuwait. Task Order 1 was issued
to the primary awardee under the solicitation.
5
Some contract line item numbers are cost plus fixed fee and others are firm fixed price. The contract
line item numbers for the maintenance work were cost plus fixed fee.
6
According to the Federal Acquisition Regulation, cost reimbursement contracts provide for payment
of allowable incurred cost, to the extent prescribed in the contract. These contracts establish an
estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor
may not exceed (except at its own risk) without the approval of the contracting officer. FAR § 16.3011.
7
These costs do not include the cost of repair parts as they are provided by the government.
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oversight team, which includes a government property administrator, quality
assurance specialist, and contract management officer. The contract oversight team
also includes five contracting officer representatives designated for specific areas of
oversight including transportation, maintenance, supply, and operations. Within the
specific areas, quality assurance inspectors perform inspections of the contractor’s
work. Quality assurance personnel at Camp Arifjan perform oversight of the
contractor’s work using a quality assurance surveillance plan. This plan, based on
requirements contained in Task Order 1, is developed by the Army and is used to
ensure that systematic quality assurance methods are used to monitor and evaluate
the performance and services of the contractor. It describes the surveillance
schedule, methods, and performance measures.
As stated in the contract quality assurance surveillance plan, the level of government
quality assurance oversight is determined by contractor performance. Specifically,
the number of quality assurance inspections may be increased, if deemed
appropriate, because of repeated failures discovered during quality assurance
inspections. Likewise, the government may decrease the number of quality assurance
inspections if performance dictates. While the contractor, and not the government, is
responsible for the management and quality control actions to meet the terms of the
contract, the government quality assurance surveillance plan was put in place to
provide government surveillance oversight of the contractor’s quality control efforts
to ensure that they are timely and effective and are delivering the results specified in
the contract. As a part of the battalion’s surveillance process, 100 percent of
equipment repaired by the contractor is inspected by quality assurance inspectors
prior to being accepted. When the contractor informs the Army that equipment is
ready to be inspected, the inspectors review the equipment for compliance with
applicable maintenance standards. According to battalion standard operating
procedures, all deficiencies identified through Army quality assurance inspections
that prohibit the equipment from meeting the established maintenance standards
shall be documented. Documented deficiencies describe the items that must be fixed
by the contractor in order for the equipment to meet the maintenance standards and
indicate that the equipment failed the Army quality assurance inspection.
The Army has developed a problem escalation and resolution process that provides
guidance for dealing with problems with a contractor. According to the process, an
identified problem that is not considered severe should be documented by the
administrative contracting officer in a corrective action report to the contractor with
a deadline for addressing the problem. The process defines severe as a problem
related to safety, security, environmental, or mission impact or the third occurrence
of the same minor problem. If the problem is determined to be severe, the
administrative contracting officer in coordination with the contracting officer should
take immediate action to address any unsafe practice and issue a contract deficiency
report to the contractor. When identified problems are not corrected after issuance of
a contract deficiency report, the situation is to be elevated to the contracting officer.
If informal communication with the contractor from the contracting officer cannot
resolve the problem, the contracting officer is to issue a formal notice to the
contractor, allowing 10 days for a response. Records of all corrective action reports
and contract deficiency reports should be provided to the contracting officer.
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The Contractor Has Had Difficulties Meeting Maintenance Standards,
Maintaining an Accurate Database, and Meeting Production Requirements
Our work highlights the difficulties the contractor has had under Task Order 1 in
meeting maintenance standards, maintaining an accurate database, and meeting
production requirements. First, in analyzing Army data, we found that from July 2006
through May 2007, 18 to 31 percent of five types of vehicles presented by the
contractor to the Army as ready for acceptance had not been repaired and maintained
to the standards specified in Task Order 1 and consequently failed government
inspection.8 In addition, agricultural inspectors stated that contractor-cleaned
equipment that was to be transported back to the United States frequently did not
meet certain agricultural standards. Second, the database into which the contractor
was required to enter the equipment’s condition codes and location contained
inaccurate information about equipment status. On numerous occasions, equipment
was coded as ready to issue when it had not passed quality assurance inspection.
According to a corrective action report issued to the contractor, a HMMWV was
coded as ready to issue; however, when a unit went to draw the vehicle, it was in a
repair facility. Third, according to the Army, the contractor had missed production
requirements and originally established deadlines for some tasks. For example, Army
officials stated that during the 12 months of a major HMMWV refurbishment
operation, the contractor never met the monthly production requirement.
Equipment Presented to the Army for Acceptance Frequently Did Not Meet
Maintenance Standards Referenced in Task Order 1
The contractor frequently presented equipment to the Army for acceptance that did
not meet the Army standards referenced in Task Order 1. According to Task Order 1,
the contractor shall ensure that equipment is repaired to specified Army standards
determined by the government. Further, the contractor was to ensure that quality
control inspections and maintenance repair of materiel deficiencies were completed.
However, the contractor frequently presented equipment to the Army that did not
meet Army standards. When the contractor completes maintenance on a piece of
equipment, it is submitted to the Army as ready for acceptance and Army quality
assurance personnel inspect the equipment to ensure that it meets specified
maintenance standards. Army quality assurance officials told us that in many cases
the contractor presented equipment to the Army as ready for acceptance that failed
Army inspection because the equipment did not meet the established maintenance
standards.
In February 2007 we issued a report on the condition of the Army’s pre-positioned
equipment located at various sites around the world. As part of that engagement, we
visited Camp Arifjan in June 2006 to determine the condition of the equipment
maintained by the Task Order 1 contractor. In our February report, we noted that 28
percent of the equipment at Camp Arifjan submitted for government acceptance had
failed quality assurance testing from June 2005 through June 2006.9 In the spring of
8
While Task Order 1’s Statement of Work did not contain a first pass yield rate requirement, it did require that the
contractor repair all equipment to certain Army standards. Therefore, we view pass/fail rates as an indicator of
the quality of the contractor’s performance in repairing equipment to Army standards.
9
GAO, Defense Logistics, Improved Oversight and Increased Coordination Needed to Ensure
Viability of the Army’s Prepositioned Strategy, GAO-07-144 (Washington, D.C.: Feb. 15, 2007).
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2007 we returned to Camp Arifjan and found similar failure rates. As shown in table 1,
our analysis of Army data found that for five types of vehicles inspected by quality
assurance personnel from July 2006 through May 2007, the percentage of equipment
presented to the Army as ready for acceptance but that failed government inspection
ranged from 18 to 31 percent.10
Table 1: Failure Rate Percentages for Selected Equipment Types
Inspected from July 2006 through May 2007
Number of
Number of
Equipment type
inspections
Percentage failed
failures
performed
M113 Armored
109
20
18
Personnel Carrier
M2A2 Bradley
404
110
27
M1025 and M1026
934
255
27
HMMWV
M1070 Heavy
Equipment
248
76
31
Transporter
Heavy Expanded
Mobility Tactical
460
122
27
Truck
Source: GAO analysis of Army data.
Similarly, in July 2007 the 401st Army Field Support Battalion began calculating (by
commodity group) the percentage of equipment that failed government inspection
each week basis.11 The battalion’s analysis found the percentage of vehicles failing
quality assurance inspection generally ranged from 23 and 32 percent in August and
September 2007 with a high of just over 55 percent in 1 week.
Analyzing the Army’s maintenance data, we also found that 702 pieces of equipment
failed Army quality assurance inspection three or more times since May 2005. One
example is an ambulance HMMWV that failed Army quality assurance inspection five
times in December 2006. This vehicle repeatedly failed inspection for a leaking heater
hose and a leaking valve cover. In another example, a Bradley Fighting Vehicle failed
quality assurance inspection three times. During the first inspection, 12 deficiencies,
including 5 that made the vehicle inoperable, were identified and documented. One of
the inoperable deficiencies discovered was a main electrical system ground that was
installed improperly, creating a safety hazard. In the second and third inspections,
multiple deficiencies that made the vehicle inoperable continued to be found, some of
which were the same deficiencies that had been previously identified.
Moreover, for the HMMWV refurbishment task, the contractor frequently presented
vehicles to the Army with multiple deficiencies. For the 5 month period from
November 2006 through March 2007, multiple deficiencies were identified through
10
As discussed later in this report, not all deficiencies are documented to illustrate that equipment
failed Army quality assurance inspection. As a result, these numbers may be understated.
11
The commodities include vehicles, small arms, ground support equipment, atmospheric test, high
dollar part verification, and paint inspection.
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government inspection of refurbished HMMWVs when presented to the Army for
acceptance. During those months, the average number of deficiencies identified per
vehicle through quality assurance inspection ranged from 2.5 to 7.4 per month.
The following inspections, which we observed during our visit to Camp Arifjan in
spring 2007, illustrate the difficulties the contractor has had meeting Army
maintenance standards. While at Camp Arifjan we observed four government
equipment inspections, two of which failed. One failed inspection was of a Bradley
Fighting Vehicle. The Bradley was presented to the Army as ready for acceptance;
however, during the quality assurance inspection the inspector found that a cotter pin
was missing. This pin holds an adjusting rod that controls the brakes on one side of
the Bradley. According to the inspector, using the brakes just two or three times
would have caused the rod to come loose, leaving the Bradley without brakes. A
second failed inspection we observed was of a forklift. Because of a burned fuse, the
forklift did not meet the maintenance standard and therefore failed the inspection.
The burned fuse was clearly visible to us and should have been easily seen by
contractor personnel.12
In a March 2006 letter to the contractor, the Army expressed concerns about the
contractor’s quality control department. Specifically, the Army stated that there was a
lack of attention to detail and inadequate maintenance inspection processes and that
quality control personnel were not ensuring that maintenance repairs were in
compliance with the appropriate maintenance manuals. Additionally, in some
corrective action reports issued after the March 2006 letter the Army continued to
express concern about the contractor’s quality control processes. Specifically, the
battalion noted that the contractor’s quality control inspections were not being
performed in accordance with Army maintenance standards and that the contractor’s
quality control checks were not adequate. Army quality assurance officials believed
that the contractor depended on the Army to identify equipment deficiencies. As a
result of these issues, government quality assurance inspectors were consistently
rejecting equipment presented as ready for acceptance.
When equipment is presented to the government and does not pass quality assurance
inspection, it is returned to the contractor for continued maintenance until it meets
the established standard. Under the cost plus fixed fee maintenance provisions in
Task Order 1, the contractor is reimbursed for all maintenance labor hours incurred,
including labor hours associated with maintenance performed after the Army rejects
equipment that fails to meet Army maintenance standards. This results in additional
cost to the government. For example, in a December 2006 quality assurance
inspection of a HMMWV, 16 deficiencies that made the vehicle inoperable were
found. According to Army data, a total of 213 hours were spent working on this
vehicle after it was initially submitted to the government as ready for acceptance. A
12
In commenting on our draft report, the contractor argued that the quality assurance surveillance plan
gave government quality assurance inspectors no guidance on how to determine whether a particular
piece of equipment passed or failed maintenance standards. Government quality assurance inspectors
use the technical manual for the specific piece of equipment to determine whether the equipment
passes or fails inspection. These manuals are also what the contractor’s chief quality representatives
said they use to repair and inspect the equipment. Also, for the maintenance area, government quality
assurance inspectors are trained mechanics with technical expertise related to the equipment being
inspected.
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second example is a Heavy Equipment Transporter (HET) that was submitted to the
Army as ready for acceptance in January 2007 and failed Army inspection. After this
first failed inspection, an additional 636 hours were charged for repairing this vehicle
before it passed government quality assurance inspection 3 months later. Although
the equipment was not initially presented to the Army at the required standard, the
Army reimbursed the contractor for the labor costs associated with the 213 and 636
hours of rework. Our analysis of Army data found that since May 2005, the contractor
worked a total of about 188,000 hours to repair equipment after the first failed
government inspection. This translates into an approximate cost to the government
of $4.2 million.13
As part of the maintenance requirements of Task Order 1, the contractor was
required to conduct wash rack operations in preparing equipment for shipment to the
United States. According to Task Order 1, the contractor was required to clean
equipment to meet the appropriate agricultural standards14 as directed by the
government. Further, Task Order 1 noted that the Department of Agriculture’s Animal
Plant Health and Inspection Service (APHIS) regulations call for the equipment to be
clean of soil, organic matter, and other contaminants.15 According to Navy customs
inspectors,16 equipment presented for inspection frequently did not meet APHIS
standards. The inspectors were unable to provide historical data on agricultural
inspection results because they had just begun to track and monitor this performance
metric. However, the officials told us that they reject most equipment at least once
due to the presence of mud and dirt. We observed an inspection in which a contractor
employee was trying to remove water from the interior of a piece of equipment with
his hands and the vehicle tracks were clearly filled with mud.
Contractor-Maintained Database Contains Inaccurate Information about Equipment
Status
The contractor-maintained database contains inaccurate information about
equipment status. The database is used for tasks that include, but are not limited to,
equipment maintenance status, scheduling equipment for maintenance, deficiency
reporting, parts management, labor reporting, and materiel expenses. Among other
things, Task Order 1 requires the contractor to ensure that correct equipment
condition codes and correct locations of equipment be entered into the database in
accordance with Army policy. However, on numerous occasions, Army officials
found that incorrect condition codes were assigned to various pieces of equipment
within the database. In some instances, equipment was coded as ready for issuance
when it had not passed quality assurance inspection. For example, according to a
corrective action report issued to the contractor, in the maintenance database the
contractor reported that a HMMWV was ready for issuance, but when the Army went
to issue this vehicle to a unit, it was in a maintenance shop being repaired by the
contractor. In another instance, the contractor had coded equipment that had not
13
As discussed later in this report, not all deficiencies are documented to illustrate that the equipment
failed Army quality assurance inspection. As a result, these numbers may be understated.
14
Task Order 1 specifies that these cleaning standards are in accordance with DODD 4500.9, DOD
5030.49-R, and ARCENT Directive 30-3.
15
7 C.F.R. Part 330.
16
Navy customs officials serve as U.S. Customs border clearance agents. They inspect material and
personnel returning to U. S. Customs territory.
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passed Army quality assurance inspection as ready for issuance and placed the
equipment in a staging area for Heavy Brigade Combat Team equipment that was
ready for issue. According to the battalion, this inaccurate reporting portrayed an
incorrect readiness posture for the combat team and could have resulted in a
crippling slowdown of the equipment issue process due to the probability of units
rejecting the equipment. The battalion issued corrective action reports to the
contractor stating that (1) the database was not being updated with proper condition
codes and (2) erroneous data may have been reported to the Department of the Army
in the battalion’s operational readiness reports. Additionally, in an assessment of the
contractor’s performance in option year 1, the contracting office stated that
erroneous equipment status reporting potentially affects the battalion’s ability to
make timely and accurate decisions regarding the availability of equipment to support
the warfighter. Among the reasons the contractor gave for the incorrect condition
codes in the database were human error and a probable fault in the manner in which
the database handles certain data.
According to the Army, the Contractor Has Missed Production Requirements and
Deadlines
According to the Army, the contractor has missed some production requirements and
some task deadlines were extended when the contractor was unable to meet original
completion dates.17 In May 2006 a task was added to the contract for the
refurbishment of HMMWVs. The statement of work associated with the HMMWV
refurbishment effort stated that the contractor was required to be able to process the
HMMWVs through the maintenance facilities at a minimum rate of 150 HMMWVs per
month. According to documents provided by the contracting officer, upon award of
this work, the contractor was provided 45 days to become fully operational, and for
months one and two of operations the production requirement was 25 and 100
vehicles, respectively. According to Army documents, after the first 2 months of
operation, the contractor was expected to be fully operational and the monthly
production requirement was increased to 150 vehicles per month. However, 18 and 90
HMMWVs were completed in the first and second months of operations, respectively.
Further, according to the Army, the contractor failed to meet its contractual
requirement of a minimum of 150 vehicles per month, and the contracting officer sent
written notices to the contractor documenting this failure. In some months fewer
than 75 HMMWVs were ultimately accepted by the Army, as shown in table 2 below.
For example, 38 vehicles were accepted by the Army in February 2007. According to
an e-mail from one of the administrative contracting officers, the contractor’s
monthly production output was influenced by issues such as deficient production
processes and supply management, quality control, and parts availability problems.
The official cited a lack of contractor standard operating procedures and in-process
quality checks as reasons for a high number of equipment defects, thereby delaying
Army acceptance of the HMMWVS. Further, the official cited contractor supply
management challenges, such as determining when to order additional parts and
17
The broad scope of Task Order 1 allows the Army to add maintenance tasks when necessary. Some
tasks like the repair of battle-damaged equipment or the preparation of equipment for return to the
United States are on-going tasks for the contract period of performance; other tasks have specific
deadlines established by contract modification. For example, preparing equipment to issue to units
supporting the surge and repairing equipment to be used in Iraq, as well as the two mentioned in this
correspondence are tasks with specific deadlines.
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ordering the right amount of parts in a timely manner, as affecting the contractor’s
ability to meet monthly production requirements. The official acknowledged that the
parts availability problem was driven by a shortage of armor and frame rails in the
Army supply system. Army officials stated that as a result of the contractor’s failure
to meet the production requirements of the HMMWV refurbishment effort, the Army
did not renew this task with the contractor at the end of the performance period.
Because this was a fixed fee provision, the Army was not able to reduce the
contractor’s fee for this task.
Table 2: HMMWV Refurbishment Center Monthly Production
Number of vehicles accepted
Production month
by the Army
June 2006
18
July 2006
90
August 2006
80
September 2006
60
October 2006
111
November 2006
105
December 2006
54
January 2007
70
February 2007
38
March 2007
40
April 2007
60
Source: GAO analysis of Army data
We also found that the contractor was unable to independently meet the original
deadlines set by the Army for two other tasks. In July 2006 the contractor began a
task to repair 150 HETs. The original completion date for this task was September 29,
2006; however, as of that date only 96 HETs had been accepted by the Army. While
the original completion date was pushed back at the mutual agreement of the
contractor and the government, Army contracting officials explained that the original
completion date for this task was extended because of the contractor’s inability to
provide the required 150 HETs by the date originally specified in Task Order 1. The
contractor also had a task to repair HMMWVs for foreign military sale to the Iraqi
security forces. This task required the contractor provide a specific number of
HMMWVs during four different periods. According to the contracting officer’s
assessment of the contractor’s performance, the contractor was unable to meet the
requirements independently and government assistance was necessary. The
contractor stated that this condition was caused by a lack of government-provided
critical parts and inbound vehicles. According to a battalion official, the battalion
allowed the contractor to use HMMWVs that the battalion planned to use to meet
other missions. At the time the contractor was preparing HMMWVs for the Iraqi
security forces, among the battalion’s other missions were repairing and replacing
equipment damaged as a result of combat and preparing equipment for a light brigade
combat team. The battalion officials stated that while using assets designated for
other missions allowed the contractor to meet the requirements of the Iraqi security
forces task, the contractor had to subsequently back fill those sources. Problems
meeting production and quality goals may have resulted in some deployed units not
receiving the equipment they needed in a timely manner.
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The Army Has Not Always Followed Established Quality Assurance
Principles
The Army has not always followed key quality assurance and contract management
principles when managing Task Order 1 because it did not implement the processes
contained in its quality assurance and contract management plans. These processes
require that contractor performance data be documented and used to assess
contractor performance, identify recurring problems, and inform contract
management decisions. However, the Army has not always documented deficiencies
identified during the battalion’s quality assurance inspections, instead allowing the
contractor to fix some deficiencies without documenting them in an attempt to
prevent a delay in getting the equipment to pass inspection. In addition, the Army did
not analyze available data to evaluate the contractor’s performance, failing to
routinely track or monitor the percentage of equipment submitted for government
acceptance that failed quality assurance inspection until July 2007. Furthermore, the
Army awarded the contractor a major HMMWV refurbishment effort, valued at
approximately $33 million, even though numerous incidents of poor contractor
performance had been documented.
Army and DOD Quality Assurance and Contract Management Principles Should
Guide Battalion Activities
The Army and DOD have developed a variety of quality assurance and contract
management principles that should guide the battalion quality and contract
management activities. The Army Quality Program is a results-based program that
allows Army activities to develop their own quality programs. However, the program
regulation states that quality programs will address the following key principles:
• Measurement and verification of conformity to requirements
• Fact-based decision making
• Use of performance information to foster continuous improvement
• Effective root-cause analysis and corrective action
• Performance of tasks by people who can evaluate quality issues and
recommend solutions
In addition, according to the Army Quality Program regulation, an activity’s (such as
the battalion’s) quality assurance program should utilize risk-based planning. In
determining the types and frequency of quality assurance actions, the activity should
consider the impact of nonconforming equipment or services as well as the
contractor’s demonstrated past performance.
DOD guidance also establishes principles for quality assurance and contract
administration. For example, according to the guidebook for performance-based
service acquisitions in DOD, each performance assessment activity should be
documented as it is conducted, whether a contractor’s performance was acceptable
or unacceptable in accordance with the performance assessment plan. In addition,
the Federal Acquisition Regulation requires that contractor performance be
documented and that past performance be considered when selecting contractors for
future contract awards.
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The Army Does Not Always Document Poor Performance
The Army has not always documented unacceptable contractor performance under
Task Order 1. The collection of performance data is the foundation for many of the
quality and contract management requirements established by Army and DOD
regulations and guidance. For example, the Army regulation establishing the Army
Quality Program requires that actions be taken to identify, correct, and prevent the
recurrence of quality issues. Furthermore, the Defense Federal Acquisition
Regulation Supplement states that the contract administration office shall establish a
system for the collection, evaluation, and use of certain quality data, including quality
data developed by the government through contract quality assurance actions.
Moreover, the battalion’s quality assurance guidance requires that deficiencies
identified through the battalion’s inspections be documented. However, some
deficiencies identified during Army inspection of equipment were not being
documented and entered into the Army maintenance database. According to battalion
quality assurance officials, while deficiencies that made the equipment inoperable
were always documented, deficiencies that did not make the equipment inoperable
but kept it from meeting the maintenance standards were commonly not
documented. Rather than documenting all the deficiencies identified, quality
assurance inspectors were allowing the contractor to fix some deficiencies without
documenting them, in an attempt to prevent a delay in getting the equipment up to
standard and passing inspection. According to quality assurance officials, it may take
an additional half a day to 1 day for equipment to be accepted by the Army when
deficiencies that do not make the equipment inoperable are documented, because of
the paperwork and process associated with correcting documented deficiencies.
Although the Army took steps to correct the lack of documentation for all equipment
deficiencies, it reverted back to its original process of not documenting all
deficiencies. Based on our review, the Army took steps in May 2007 to ensure the
documentation of all equipment deficiencies identified during Army quality assurance
inspections. The lead quality assurance official directed that all equipment
deficiencies be documented so that the Army would have an accurate picture of the
contractor’s maintenance quality. We were later told by quality assurance officials
that inspectors followed this direction and documented all equipment deficiencies
that were identified during inspections for approximately 2 weeks. However, the
officials stated that after about 2 weeks the inspectors went back to the practice of
allowing the contractor to correct those deficiencies that did not make the equipment
inoperable without documenting them. They cited the need to get the equipment to
the units quickly as the reason for doing this. When contractor performance is poor,
the need for rigorous government quality assurance oversight becomes even more
important. We believe that the deficiencies can be documented without a delay in
getting the equipment to the units. For example, the inspector can document the
deficiencies identified during the inspection on the appropriate worksheet, and at the
end of the inspection it can be noted that the deficiencies were corrected. This
worksheet would be included in the equipment packet provided to the personnel
responsible for updating the equipment status codes in the maintenance database.
When the equipment status code is updated in the maintenance database, it should be
noted that deficiencies were identified and were corrected, and that the equipment
subsequently passed quality assurance inspection and is ready for issuance.
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The Army Did Not Analyze Available Data to Evaluate Contractor Performance until
July 2007
The Army did not analyze available data to evaluate the contractor’s performance in
meeting the specified maintenance standard requirements until July 2007. The Army
quality program specifies the use of performance information to perform root-cause
analysis and foster continuous improvement, and the battalion’s July 2006 draft
maintenance management plan requires that contractor performance data be
analyzed to help identify the cause of new and/or recurring quality problems and
evaluate the contractor’s performance. As previously mentioned, Army quality
assurance personnel inspect equipment submitted for Army acceptance to ensure
that it meets the specified maintenance standards. The results of these inspections,
including data documenting whether the equipment has been accepted or rejected by
the Army, are maintained by quality assurance officials as well as in the Army
maintenance database. However, in February 2007, we reported that the maintenance
battalion had not routinely tracked or monitored the percentage of equipment
submitted for government acceptance that failed quality assurance inspection.18 While
we found that the inspection results data were readily available to the maintenance
battalion, it was still not tracking or monitoring this key performance metric. Because
the battalion does not track and monitor the percentage of equipment submitted for
Army acceptance that failed quality assurance inspection, the Army does not know
the extent to which the contractor is meeting the specified maintenance standard
requirements nor can it identify problem areas in the contractor’s processes and
initiate corrective action. According to Army quality assurance officials, this metric
was not tracked and monitored because they did not have sufficient quality assurance
staff to perform such analysis. Recognizing the usefulness of this performance metric,
the lead quality assurance inspector informed us that in July 2007, he began
calculating the percentage of equipment that is failing quality assurance inspection
each week, and this information is presented to the battalion commander at
command and staff updates. He said that this information is used to identify
maintenance shops that are not improving their performance and to develop
historical data on the contractor’s performance. In the past, the command has
initiated improved oversight practices but has later discontinued them. Maintaining
the practice of tracking and monitoring performance metrics would provide key data
for assessing the contractor’s performance.
The Army Awarded Additional Work to the Contractor despite Performance
Concerns
In May 2006, the Army added a major HMMWV refurbishment effort valued at
approximately $33 million to Task Order 1 despite concerns of poor contractor
performance. According to contracting officials, Task Order 1 provided an existing
contract that could be used to expeditiously provide the required HMMWV
refurbishment capability. However, prior to the work being added to Task Order 1,
numerous incidents of poor contractor performance were documented. We found
that from October 2005 through April 2006, 8 notices describing poor performance
18
GAO 07-144.
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were issued to the contractor. Some of the poor performance concerns mentioned in
the notices follow:
• Equipment status is not being updated in the reporting system. As a result,
the maintenance battalion operational readiness reports are inaccurate and
erroneous data are being reported to the Department of the Army.
• Equipment is not being inspected in accordance with Army standards
specified in Task Order 1 and initial technical inspections are not being
conducted within the timeframe specified in the task order.
• Contractor quality control inspections performed before equipment is
presented to the government are inadequate and are not identifying critical
maintenance faults.
• Sensitive items are improperly accounted for.
Additionally, in a letter dated March 15, 2006, the Army contracting officer notified
the contractor of numerous areas of concern. The letter stated that asset
management was ineffective to the point that the battalion’s ability to report
readiness and determine when assets would be ready was impaired, maintenance
could take significantly less time if thorough equipment assessments were performed,
and equipment was consistently rejected because of inadequate quality control. The
letter also stated that the Army felt that the contractor’s personnel staffing was
insufficient to achieve all missions, as only 89 percent of the personnel that the
contractor proposed to execute the contract requirements were on-hand for option
year 1. More specifically, the letter stated that only 36 percent of the required
personnel were on hand to perform the priority mission of preparing the Heavy
Brigade Combat Team although funding had been placed on the contract for the
mission. In addition, the Tire Assembly and Repair Program and Add-on Armor
missions had only 41 percent and 45 percent of the required personnel on hand,
respectively, despite being funded.
We asked the Army contracting officer with overall responsibility for the contract
why such a major mission was added to the contract, given the battalion’s concerns
with the contractor’s performance. The Army official responded that the battalion did
not raise concerns regarding the contractor’s capability to meet the requirements and
there was confidence that the work was being placed with a contractor that had a
good history of performance in theater. The official stated that while a letter citing
concerns with the contractor’s ability to ramp up to full personnel strength and its
quality control processes was issued, the Army believed the contractor was fully
engaged in correcting the issues.
Battalion quality assurance officials told us that all information regarding contractor
performance is not always provided to the contracting officer. According to the
Army’s problem resolution process, all corrective action requests should be sent to
the contracting officer, but this was not being done according to battalion quality
assurance officials. In some situations, the quality assurance officials wait until they
have issued two or three requests related to the same area before they send the
information to the contracting officer. Following this procedure could result in some
corrective action requests not reaching the contracting officer. Additionally, some
battalion officials said that they do not write as many corrective action requests as
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are needed because they would spend most of their time writing them because of the
repeated poor performance.
Battalion’s Contract Management Oversight Team Is Inadequately Staffed
According to Army officials, the battalion’s contract management oversight team is
inadequately staffed to effectively oversee Task Order 1 in Kuwait and the battalion is
concerned about its ability to administer cost plus award-fee provisions. We have
previously reported on the need to have an adequate number of oversight personnel
to ensure the effective and efficient use of contractors and the continued shortage of
contract oversight personnel in deployed locations. Oversight personnel are
responsible for performing the various tasks needed to monitor contractor
performance, document results of inspections, analyze available inspection data,
assess overall contractor performance, and evaluate the contractor’s performance
when considering awarding additional work to the contractor. The battalion uses
both military and civilian personnel to provide contract oversight. Battalion officials
told us that there were not enough trained oversight personnel to effectively oversee
and manage the maintenance contract in Kuwait. At the time we visited the battalion
in April 2007, four oversight personnel positions were vacant and were still vacant as
of September 2007. The vacancies included those for two military quality assurance
inspectors and two civilian positions–a quality assurance specialist and a property
administrator. Command officials were unsure why the military quality assurance
positions had not been filled and told us that the vacant civilian positions were
advertised but the command had not been able to fill the positions with qualified
candidates. An administrative contracting officer told us that the quality assurance
specialist position was filled for a short time in December 2006; however, the person
was deemed unqualified and was assigned to another position. The quality assurance
specialist is responsible for such activities as performing analysis of quality processes
and procedures, tracking and coordinating training for quality assurance personnel,
updating quality assurance surveillance plans, and ensuring productive interaction
between Army and contractor quality personnel.
Additionally, the battalion has been without a property administrator since the end of
2006, even though both the battalion and the Army Sustainment Command have
identified issues with the contractor’s accountability for government furnished
equipment. According to DOD’s Manual for the Performance of Contract Property
Administration, property administrator responsibilities include administering the
contract clauses related to government property in the possession of the contractor,
developing and applying a property systems analysis program to assess the
effectiveness of contractor government property management systems, and
evaluating the contractor’s property management system and recommending
disapproval where the system creates an unacceptable risk of loss, damage, or
destruction of property. We found that some property administrator duties, such as
approving contractor acquisition of items, were being performed by an administrative
contracting officer; however, other important duties were not being performed. In
March 2007, a team from the Army Sustainment Command’s Office of Internal Review
and Audit Compliance conducted a review of government-furnished property
accountability in Kuwait and identified areas for improvement in property
accountability. For example, the team found that while required property
accountability reports were prepared by the contractor, they were not being provided
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to the Army nor did the Army request the reports. After reviewing one such report,
the evaluation team questioned its accuracy. It found that the contractor was
reporting a total of $2.4 million in government-furnished property; however, the value
of two of the eight property listings reviewed totaled more than $2 million. Without
adequate oversight of government property, the Army cannot be certain that
duplicate supplies have not been ordered, government property is not misplaced or
misused, and property in the possession of the contractor is being efficiently,
economically, and uniformly managed.
In addition to the two vacant quality assurance inspector positions mentioned above,
Army officials also told us that additional quality assurance inspectors were also
needed. The officials explained that three quality assurance inspector positions were
removed from the Army’s authorized battalion organizational structure; however, the
officials were not sure why the positions were removed because they believe the
need still exists for the inspectors. According to battalion officials, vacant and
reduced inspector and analyst positions mean that surveillance is not being
performed sufficiently in some areas and the Army is less able to perform data
analyses, identify trends in contractor performance, and improve quality processes.
In some instances when contract administration and management positions cannot
be filled permanently, the Army fills these positions temporarily. For example, the
Army filled a vacant administrative contracting officer’s position in Qatar with an
Army reservist called to active duty to fill the position for a specific period–2 months.
In Kuwait, the battalion tried to fill the vacant positions temporarily but was
unsuccessful. According to the battalion, it solicited for volunteers to fill the critical
positions in Kuwait with deployments up to 179 days and requested volunteers from
the Army Reserve and Guard. In addition, a relocation incentive was requested and
approved for the critical property manager and quality assurance specialist positions.
Also, the battalion said that it offered off-post housing to some Army civilian
applicants and augmented military requirements with the mobilization of the U.S.
Army Reserve Multi-Functional Support Command.
As an alternative to providing its own contract administrative and oversight staff, the
Army could have delegated the administrative responsibilities for Task Order 1 to the
Defense Contract Management Agency (DCMA). DCMA is a combat support agency
tasked with providing contract administration support for contingency contracts like
the GMASS contract and task orders at the request of the contracting officer.
Depending on the delegation from the contracting officer, DCMA contract
administrative personnel can provide a number of contract administrative services.
For example, DCMA can assume responsibility for performing property
administration, provide quality assurance specialists and supervise contracting
officers’ representatives, monitor and evaluate technical performance, and review
and approve purchase requests. In addition, DCMA administrative contracting
officers may be given authority to negotiate certain price adjustments.
Battalion officials also expressed concern that the battalion’s current staffing levels
will make the potential transition from a cost plus fixed-fee to a cost plus award-fee
structure for maintenance and supply services difficult. According to the GMASS
indefinite delivery/indefinite-quantity contract, the Army envisioned transitioning to a
cost plus award-fee structure in option year two for maintenance and supply services,
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although the government reserved the right to change the contract line item
structure. According to the contracting officer, the Army initially chose not to move
to an award fee because the battalion did not believe it had the staff to properly
administer the contract. We have previously reported that the development and
administration of cost plus award-fee contracts involve substantially more effort over
the life of a contract than do cost plus fixed-fee contracts.19 For award-fee contracts,
DOD personnel (usually members of an award-fee evaluation board20) conduct
periodic—typically semiannual—evaluations of the contractor’s performance against
specified criteria in an award-fee plan and recommend the amount of fee to be paid.
The Army contracting office is considering transitioning the major elements of option
year 3 (including maintenance and supply services) from a cost plus fixed-fee
structure to a cost plus award-fee structure, beginning January 1, 2008. However,
according to battalion officials, they will not be adequately organized and staffed to
properly administer award-fee structured provisions until about April 2008. Battalion
officials stated that a new battalion commander took command on August 1, 2007,
and as a part of his new role, he is reviewing the battalion’s organization and
suggesting changes to better align the battalion to provide adequate contractor
oversight and properly administer an award-fee contract. They stated that it would
take some time before these changes would be in place and personnel are properly
trained to take the actions needed to monitor contractor performance and assist in
making award-fee decisions. Without adequate staff to monitor and accurately
document contractor performance, analyze data gathered, and provide meaningful
input to the award-fee board, it will be difficult for the Army to effectively administer
an award-fee contract beginning in January 2008.
Conclusions
The Army has not taken sufficient actions to ensure quality contractor maintenance
and efficient contract oversight. Given the poor performance by the contractor,
adequate and well-documented surveillance, along with necessary corrective actions,
are essential to improving the quality of work by the contractor. Poor performance by
the contractor and inadequate Army oversight have resulted in expenditure of
additional funds with less-than-expected results, additional cost to repair items
already presented to the Army as meeting established standards, and may have
resulted in delays in providing assets to deployed units. Without sufficient oversight
of contractor performance, the Army cannot ensure that operation and maintenance
funds for vehicle maintenance are being used cost effectively. Moving to a cost plus
award-fee structure for certain elements of option year 3 will provide more risk to the
contractor, potentially resulting in improved performance. However, without
adequate Army oversight personnel and contractor performance data to make awardfee decisions, the Army cannot accurately determine whether the contractor should
receive an award, and if so, how much. Without aggressive action on the part of the
Army, the problems highlighted in this report will continue.
19
GAO NASA Procurement: Use of Award Fees for Achieving Program Outcomes Should Be
Improved. GAO-07- 58 (Washington, D.C.: Jan. 17, 2007).
20
Award-fee evaluation board members may include personnel from key organizations knowledgeable
about the award-fee evaluation areas, such as engineering, logistics, program management,
contracting, quality assurance, legal, and financial management; personnel from user organizations;
and personnel from cognizant contract administration offices.
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Recommendations for Executive Action
We are making five recommendations in this report. We recommend that the
Secretary of Defense direct the Secretary of the Army to review and evaluate the
Army’s procedures for managing and overseeing the GMASS task order in Kuwait and
take the necessary actions to improve contract management. We also recommend
that the Army develop a strategy to implement its current quality assurance and
maintenance management oversight plans to ensure that
• all deficiencies are documented in the Army’s quality assurance database
without affecting the mission
• contractor data are analyzed to improve contractor performance, and
• all information on contractor performance is provided to the contracting
officer.
In addition, we recommend that the Army:
• take steps to fill vacant oversight positions with personnel who have the
appropriate knowledge and skills, and
• develop a plan to allow the proper administration of the cost plus award-fee
structure for maintenance and supply services.
Furthermore, we recommend that the Army consider delegating some additional
oversight responsibilities to DCMA to meet some of the current contract management
and oversight personnel shortfalls.
Agency Comments and our Evaluation
In commenting on a draft of this report, DOD concurred with our recommendations
and discussed proposed implementation actions to be taken by the Army. In
responding to our recommendations for the Army to improve contract management
and develop a plan to allow for the proper administration of a cost plus award-fee
contract, DOD stated that the Army is reviewing the contract to determine the best
contract type to improve contract management. Assuming the Army is adequately
organized and staffed to administer the contract type selected, we believe that this
action could allow the Army to identify and determine the best procedures for
managing and overseeing this contract. In response to our recommendation that the
Army develop a strategy to implement its current quality assurance and maintenance
management oversight plans, DOD said the Army Field Support Battalion-Kuwait has
developed a multi-pronged strategy to implement and/or improve quality assurance
and maintenance management oversight. We believe effective implementation of the
strategy should address our recommendation. In response to our recommendation
that steps be taken to fill vacant oversight positions, DOD said that the Army
continues to exercise several recruiting authorities to entice qualified candidates to
fill critical vacancies. However, the Army stated that filling the critical quality
assurance specialist position continues to be difficult. According to the Army, in
December 2007, both the first and second choice to fill the position declined the
offer. The position is being announced again and the Army is working to streamline
the recruit and fill process and will continue to pursue filling this critical position.
Given the difficulties of filling deployed positions, we believe these actions are
reasonable and should help to identify someone to fill this position. In response to
our recommendation for the Army to consider delegating some additional oversight
responsibilities to DCMA, DOD stated that delegating additional oversight
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responsibilities to DCMA is predicated on the ability of the DCMA to support the
contract. We understand that DCMA would play a major role in the decision to
delegate additional oversight responsibility to them. DOD’s comments are reprinted
in enclosure II.
____________
We are sending copies of this report to the appropriate congressional committees, the
Secretary of Defense and the Secretary of the Army. We will also make copies
available to others upon request. In addition, this report will be available at no charge
on the GAO Web site at http://www.gao.gov.
If you or your staff has questions, please contact me at (202) 512-8365 or
solisw@gao.gov. Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. Key contributors to this report
are listed in enclosure III.
William M. Solis
Director, Defense Capabilities and Management
Enclosures - 3
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List of Committees
The Honorable Carl Levin
Chairman
The Honorable John McCain
Ranking Member
Committee on Armed Services
United States Senate
The Honorable Daniel K. Inouye
Chairman
The Honorable Ted Stevens
Ranking Member
Subcommittee on Defense
Committee on Appropriations
United States Senate
The Honorable Ike Skelton
Chairman
The Honorable Duncan L. Hunter
Ranking Member
Committee on Armed Services
House of Representatives
The Honorable John P. Murtha
Chairman
The Honorable C. W. Bill Young
Ranking Member
Subcommittee on Defense
Committee on Appropriations
House of Representatives
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Enclosure I: Scope and Methodology
To evaluate the contractor’s performance of maintenance and supply services under
the Army’s Global Maintenance and Supply Services task order, Task Order 1, we
interviewed Army contracting officials at the Army Sustainment Command in Rock
Island, Illinois; interviewed Army officials of the 401st Army Field Support Battalion at
Camp Arifjan, Kuwait as well as contractor representatives responsible for the
management of Task Order 1; reviewed various Army and contractor documents
related to contractor execution; and observed the contractor’s maintenance
processes. We reviewed all records of quality assurance inspections conducted from
November 2005 through May 2007 for equipment maintained by the contractor.
Subsequently, we analyzed the inspection result data for selected equipment types
inspected from July 2006 through May 2007 to determine the percentage of items
failing inspection. We subjectively selected equipment types that were commonly
repaired by the contractor, were perceived to be critical to the fight in Iraq and
Afghanistan, and were among the battalion’s highest repair priorities. Although the
Army has not documented all deficiencies that would indicate failed inspections and
be recorded in the database, we determined that the data were sufficiently reliable
for the purpose of our review. We took several actions to assess the reliability of the
data. Specifically, we reviewed battalion guidance and procedures for how
inspections should be conducted and documented, interviewed several quality
assurance inspectors to determine how they conducted and documented inspections,
observed the conduct of some quality assurance inspections, and observed the
documentation of inspection results. We also met with representatives of the
contractor, reviewed quality data provided by the contractor, and discussed our
report’s findings, conclusions, and recommendations with contractor representatives.
To determine the extent to which the Army’s quality assurance and contract
management activities implement key principles of quality assurance and contract
management regulations, we met with contracting and quality assurance officials at
Camp Arifjan, Kuwait, and Rock Island, Illinois, and reviewed oversight and
surveillance plans and inspection records. We reviewed a variety of quality assurance
and contract management regulations and guidance, including the Army Quality
Program regulation and the Defense Federal Acquisition Regulation Supplement. In
addition, we spoke with representatives of the contractor and reviewed data provided
by the contractor. We also observed physical inspections of four pieces of equipment
presented to the Army while we were at Camp Arifjan and analyzed Army-provided
data on oversight and surveillance.
To determine if the battalion was adequately staffed to perform oversight activities,
we reviewed battalion staffing documents and spoke with battalion oversight and
command officials as well as officials from the Army Sustainment Command. In
addition, we reviewed Department of Defense and Army guidance and regulations
regarding contract oversight and management. We conducted this performance audit
from March 2007 through December 2007 in accordance with generally accepted
government auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and conclusions based
on our audit objectives.
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Enclosure II: Comments from the Department of Defense
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Enclosure III: GAO Contact and Staff Acknowledgments
GAO Contact
William M. Solis, (202) 512-8365 or solisw@gao.gov
Acknowledgments
In addition to the contact named above, Carole Coffey, Assistant Director; Sarah
Baker; Renee Brown; Janine Cantin; Ronald La Due Lake; Katherine Lenane; and
Connie W. Sawyer, Jr. made key contributions to this report.
(351106)
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